Dealing with the “Side Effects” of Bankruptcy

A lot has been written about restoring one's financial fitness after bankruptcy, but bankruptcy does just as much damage to a person's psyche. After bankruptcy, anger and shame are natural emotions, but they don't need to last forever. Many people find that a financial catastrophe like this it is just what they needed to get a fresh start. While this doesn't negate the fact that bankruptcy causes long-term damage to their credit report, one that won't go away yet for seven years, it is still better than continuing along the path they were on.

Even if your friends and family tell you it's going to be okay, the experience can still be bruising to your ego. "The creditors make you feel like you failed, you are a loser and you are worthless," says Robin Hardy, a person whose company, the Moosey Group Inc., filed for bankruptcy.

According to many bankruptcy "survivors," a common reaction is a feeling of failure. The shame of having to declare bankruptcy can be crippling at first, particularly for successful entrepreneurs and business leaders. Feelings of failure go beyond one's personal bank balance and extend to include family relationships, business alliances and one's professional reputation. Needless to say, this impact is felt beyond the individual. This is why it is so important to take any necessary steps to avoid bankruptcy entirely.

Secrets of surviving personal bankruptcy:

Here are some "survival tips" to help you stay out of trouble before you contemplate bankruptcy:Don't bite off more than you can chew. Every time you make a purchase with a credit card, put away the amount of that purchase in a separate account and pay the bill in full every month. This may be a difficult habit to form but it will keep you from accumulating more debt.

Downsize your lifestyle. Get a roommate or find a less expensive place to live. Avoid the dining out trap and learn to cook delicious meals at home. Bring your lunch instead of going out every day. Cut back on "extras," like premium cable channels, satellite radio, regular massages.

If you do have to declare bankruptcy, don't wallow in guilt. A lot of people find that they get a second chance at life through bankruptcy. Take this time to reinvent yourself and take this opportunity to get a fresh start with your financial future. From a business perspective, bankruptcy forces you to explore who you really are and embrace the opportunity to reinvent yourself.

Why do women file for bankruptcy?

Other than women who have overspent on credit cards, there is another set of circumstances that affects women more than men. It is the dishonesty of a significant other or spouse.

In many cases, a woman's husband may have convinced her to put her home in her name only, but then when the relationship fell apart she was stuck with the burden of paying the mortgage. In other cases, a woman may have added a fiancé or significant other to her credit card, then after breaking the engagement she was forced to file for bankruptcy because of the bills he racked up.

Other than dishonesty, some common causes include a bad economy, medical bills and job loss. Many women have found they needed to file for personal bankruptcy after a divorce if their job wasn't sufficient enough to sustain their current debt load.

No matter how you landed in bankruptcy court, it isn't a death sentence. Many people find that after bankruptcy they are happier, more grounded in their personal lives and careers, and better able to navigate their financial future.

Who is filing for bankruptcy?

According to one of our recent blogs, "What Are The Patterns of Bankruptcy Filers" the most common reasons for bankruptcy are often related to circumstances beyond the control of the filer. For example, a study from 2005 revealed that 46 percent of bankruptcies were related to medical expenses from a serious illness not covered by insurance and the resulting loss of income. Shortly after this study was completed, drastic changes in the economy caused bankruptcy from unemployment, underemployment and credit card debt.

At the time of petition, the average age of the filer seems to be rising. Since the early 90's more senior citizens are declaring bankruptcy while fewer filers are under the age of 25. In fact, since 2007 those under 25 made up less than 2% of all filers. During that same period of time, the percentage of older petitioners more than doubled, now accounting for nearly 20% of all filers.

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